#1
Which of the following is NOT a determinant of price elasticity of demand?
Advertising expenditure
ExplanationAdvertising expenditure does not directly impact the elasticity of demand as it focuses on promotional efforts rather than inherent product characteristics.
#2
What is the main function of fiscal policy?
To manage government spending and taxation
ExplanationFiscal policy aims to control the economy through government spending and taxation adjustments.
#3
What is the concept of opportunity cost in economics?
The cost of the next best alternative when making a decision
ExplanationOpportunity cost represents the value of the best forgone alternative when a decision is made.
#4
What is the concept of the 'invisible hand' in economics?
The tendency of markets to self-regulate through the actions of individuals pursuing their self-interest
ExplanationThe invisible hand refers to the idea that individuals, by pursuing their own interests, unintentionally contribute to the overall economic well-being.
#5
What is the law of demand?
As the price of a good increases, the quantity demanded decreases
ExplanationThe law of demand states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity demanded.
#6
What is the formula for calculating total revenue?
Price × Quantity demanded
ExplanationTotal revenue is calculated by multiplying the price of a good by the quantity demanded.
#7
What does the term 'price floor' refer to in economics?
A legally established minimum price for a good or service
ExplanationA price floor is a regulatory measure setting the lowest allowable price, preventing it from falling below the specified level.
#8
In a perfectly competitive market, how does an increase in demand affect equilibrium price and quantity?
Price and quantity both increase
ExplanationIn a perfectly competitive market, increased demand leads to a simultaneous rise in both equilibrium price and quantity.
#9
What is the law of diminishing marginal returns?
As more units of a variable input are added to a fixed input, the marginal product of the variable input eventually decreases
ExplanationThis law states that the additional output gained from increasing one input while keeping others constant will decrease over time.
#10
Which of the following is NOT a characteristic of monopolistic competition?
Price taker
ExplanationMonopolistic competition involves firms with some control over pricing, making them price makers rather than price takers.
#11
Which of the following is NOT a characteristic of a perfectly competitive market?
Barriers to entry
ExplanationPerfectly competitive markets are characterized by ease of entry and exit, with no significant barriers hindering new firms from joining.
#12
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationPrice elasticity of demand is computed by dividing the percentage change in quantity demanded by the percentage change in price.
#13
What is the main function of a central bank in an economy?
To control inflation and manage monetary policy
ExplanationThe central bank's primary role is to regulate inflation levels and oversee the monetary policy of a country's economy.
#14
What is the 'Phillips Curve' in macroeconomics?
A graphical representation showing the relationship between inflation and unemployment
ExplanationThe Phillips Curve illustrates the trade-off between inflation and unemployment, highlighting an inverse relationship between the two.
#15
Which of the following is an example of an expansionary monetary policy?
Decreasing the discount rate
ExplanationReducing the discount rate is a measure in expansionary monetary policy, intended to stimulate economic growth by making borrowing more attractive.
#16
What is the difference between nominal GDP and real GDP?
Real GDP is adjusted for inflation, while nominal GDP is not
ExplanationReal GDP accounts for inflation, providing a more accurate reflection of an economy's actual production, whereas nominal GDP does not.
#17
In the context of international trade, what is protectionism?
The policy of imposing tariffs and quotas to protect domestic industries
ExplanationProtectionism involves the use of trade barriers such as tariffs and quotas to shield domestic industries from foreign competition.
#18
What is the difference between microeconomics and macroeconomics?
Microeconomics focuses on individual markets, while macroeconomics focuses on the economy as a whole
ExplanationMicroeconomics analyzes individual markets and economic agents, while macroeconomics studies the aggregate behavior of the entire economy.